Resources » Articles » Wind-energy-credits



August, 2009
Payne, Nickles & Company

Wind energy can be used to produce clean, free power for homes, farms, and businesses with the use of electric generators, better known as small wind turbines. This recent and popular technology is sweeping across the US, and is allowing individuals to generate their own power, cut the cost of their energy bills, and help the environment by going “green”.

Federal Credits

The United States is the world’s leading producer of small wind turbines, and is expected to be for many years to come. In 2009, Congress passed a new Energy Credit encouraging individuals and businesses to use the new technology which they believe will be the future of our country.

As in years past, taxpayers are permitted to take an income tax credit for electricity produced under the electricity production credit (Code Section 45) which is a credit for electricity produced from renewable resources. The credit is 1.5¢ per kilowatt hour (KWH) of electricity produced by the taxpayer from qualified energy resources at a qualified facility during a 10 year period and sold by the taxpayer (the producer of the electricity eligible for the credit) to an unrelated person during the tax year. Taxpayers can elect to receive a Section 1603 30% grant in lieu of the electricity production credit, but may not receive both a credit and this grant. The electricity production credit is reduced by any other government grants, subsidies, or other credits. This credit was extended by The Working Families Tax Relief Act of 2004.
In 2009, the Energy Credit (Code Section 48) was passed and allows taxpayers a 30% income tax credit on the cost of qualified small wind energy property. The definition of “qualified small wind energy property” means property which uses a qualifying small wind turbine to generate electricity. The definition of “qualifying small wind turbine” means a wind turbine which has a nameplate capacity of not more than 100 kilowatts. Any qualified wind facility is eligible as long as the facility is placed in service in 2009, 2010, 2011, or 2012.
For qualified property that is part of qualified investment credit facilities (code Section 45 above), taxpayers can make an irrevocable election to take a 30% energy credit under Code Section 48 instead of the electricity production credit, as long as no credit has been take under Code Section 45. However, a taxpayer can not take both the energy credit and the electricity production credit. It is important for the taxpayer to evaluate which of the two credits will be more advantageous when preparing their tax return.

In addition to the above Federal credits, many states have also adopted programs and incentives for producing electricity from certain renewable resources, of which one is wind energy. OHIO has adopted wind energy incentive programs which are listed below.

Ohio Taxpayers & Residents

The Renewable Energy Program (NOFA 08-09) is a grant program to assist with reducing the cost of the wind energy project for commercial, industrial, and institutional government entities in Ohio.

The Residential Wind Energy Incentive (Wind Electric / Wind Turbines) (NOFA 09-02) is a program that awards grants up to a maximum of $25,000 to residential homeowners for the implementation of wind energy technologies. Qualifying applicants will be eligible to apply for grant assistance to cover a portion of the costs of eligible projects who have an active account and are connected to the electric grid with one of the four participating electric distribution companies in the State of Ohio: American Electric Power, Duke Energy, First Energy, and Dayton Power and Light. 

Applications started to be accepted on December 31, 2008 with an expected turn around of 30 days to determine whether the application is approved or denied. Applicants are accepted on a first-come, first serve basis until all funds are awarded. Projects are to be completed no later than 12 months from the date of the grant execution. Funds will be given when the project is complete and a final inspection approval.

In addition to these programs above, there are other incentives/credits that taxpayers can take advantage of by using wind energy. Some of these are:
1) Real estate exemption on the part of the land that the turbine is occupied on
2) Credit on utility bills for electricity distributed to utility lines, and
3) Payments received from utility companies by selling wind power to them

The Ohio Department of Development office has grants available for Ohio manufacturers that implement energy efficient projects.  The manufacturer’s investment must be in energy efficient equipment, the grant incentive is 25% of the cost, and the maximum grant award is $50,000.

The Ohio Department of Development office has grants available for the Renewable Energy Program.  Wind electric systems can receive a maximum 40% incentive with the maximum incentive of $200,000.

If you have any questions regarding this article please contact

Treasury Circular 230 Disclosure
Unless expressly stated otherwise, any federal tax advice contained in this communication is not intended or written to be used, and cannot be used or relied upon, for the purpose of avoiding penalties under the
Internal Revenue Code, or for promoting, marketing or recommending any transaction or matter addressed herein.

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